Website vs. Retail Pricing Issue

[Vintage Bubbles]

Hello everyone,

We are a young company and still learning the various intricacies in our niche. We have run into an issue with a store we do business with and are looking for information/advice from experience. The background info is that we offer our own retail pricing on our website as well as wholesale pricing to various stores in our region. Our current issue is with an individual retail store that works on consignment so they aren't paying for products up front.

To make the numbers simple, we offer a product on our website at $1.00 to stay competitive with other companies in our niche. This same product is offered to said retail store at $0.55 (45%) wholesale. This retail store has decided to markup and showcase our product to their customers for $3.50. The sales have not been well for them so they contacted us regarding the issue. They did not offer any price negotiation option, just a demand to either (1) raise our website prices to match them at $3.50, (2) offer them wholesale for $0.40 (60%) or (3) terminate the relationship. We would like to know from anyones experience if their notification is justifiable or just a case of them trying to strong-arm us. Thanks.

[vangogh]

Welcome to the forum Vintage Bubbles. It's hard to know the motivation of the specific store in question. It does sound a little like strong arming, but it's hard to say without knowing more. I think from your perspective it's less about their motivation though and more about how any change in price would affect your business. How important are sales from that one store to your overall business? Assuming they can sell more with the changes they're demanding, how would it compare with any loss of sales on the website at the increased price or loss in revenue from reducing the wholesale price for this retailer (and others?)

You might also work with this store to try a few things. Maybe they lower their price for a month (not to $1, but say $2.50) Would that make a difference in sales? Maybe you could work with them to lower their price, while also lowering what you charge them. See if the store is open to other suggestions, but in the end think about this in terms of your business. How much you need this particular store will tell you whether or not you should give in to their demands.

[Fulcrum]

Beware your margins before lowering your price. I would assume that 60% off your retail price probably puts you into the razor thin profit line (please correct me if I am wrong). If, on the other hand, your margins are high enough , you can tell the customer that they will need to purchase XXXX number of units and pay COD as a condition of the discount.

Don't let the customer tell you that you need to raise your prices when in fact they are trying to turn a 636% markup. You sell your own product as well and have given them a MSRP. Just because they choose to ignore what you recommend is no reason for them to try and pull this kind of stunt.

[gaseousclay]

Beware your margins before lowering your price. I would assume that 60% off your retail price probably puts you into the razor thin profit line (please correct me if I am wrong). If, on the other hand, your margins are high enough , you can tell the customer that they will need to purchase XXXX number of units and pay COD as a condition of the discount.

Don't let the customer tell you that you need to raise your prices when in fact they are trying to turn a 636% markup. You sell your own product as well and have given them a MSRP. Just because they choose to ignore what you recommend is no reason for them to try and pull this kind of stunt.

+1

Do not let a wholesale customer dictate the terms of your pricing. YOU determine the MSRP on your product, not the store and especially not a store that hasn't paid you for your product. If they want to haggle on price then they either need to order in bulk quantity to bring their cost down, which means you'll have to offer distributor pricing at more than 45% off, OR, you can stop doing business with them. If they're suggestion 60% wholesale pricing then you need to tell them they have to order in bulk to get that pricing, so long as it makes financial sense for you to do so. They're in no position to be making threats, especially when the onus is on them for raising their MSRP above and beyond what is reasonable and what customers are willing to pay.

For example, I work with a company that sells a product for XX amount wholesale. I have to order their product by the case to get XX wholesale pricing. They specifically state that I cannot undercut them on retail pricing nor can we sell wholesale to other vendors. This is to ensure market viability for their product. If we undercut them they'll stop selling to us. It's pretty clear cut.

[shadojake]

I also sell all my designs on my website. I also sell to individuals in my community, using my website prices. I have one of my particular coasters designs in a local retail store. My wholesale price is 60% of my retail price (based on my website/individual sales) It is the lowest I feel comfortable going for any wholesale deal. This store keystone's their prices so they sell my product for twice what it cost them. So their retail price is above what I charge.

Here is the deal .... I personally am not trying to maintain a store front, pay employees, pay rent/utilties/insurance on a store front, etc. I have expenses but I have less overhead than a storefront. I am not going to give away my product. They can pay what I have determined is a fair price or they can choose not to.

When I first approached them about this they were concerned about competing with my website. I told them I really didn't feel it was competition because the website was directed toward people who did not live in our area. My point of a website is to reach customers who never visit our area but want the product. I also explained that even if a local person ordered on my website they would pay shipping which puts the final price at or above what they are charging at their store.

Most local orders come via phone. I don't feel I have to justfy (to a 3rd party) what I am charging. However, I will add that consistency in pricing is also an important factor.

What is funny is that I have an order that goes out today and is going to California from where I live in Louisiana. The customer thought I was undercharging here. She wanted me to charge more!! I told her that I understood there was a cost of living differential between California and most of the rest of the rest of the country. I cannot make myself charge someone more just because they live in XX state or region. My prices are fair based on where I live and do most of my business. As the cost of my supplies go up, I will make adjustments but will not do arbitrary price increases/decreases based on a customer's place of residence or a retailers demand.

[Fulcrum]

What is funny is that I have an order that goes out today and is going to California from where I live in Louisiana. The customer thought I was undercharging here. She wanted me to charge more!! I told her that I understood there was a cost of living differential between California and most of the rest of the rest of the country. I cannot make myself charge someone more just because they live in XX state or region. My prices are fair based on where I live and do most of my business. As the cost of my supplies go up, I will make adjustments but will not do arbitrary price increases/decreases based on a customer's place of residence or a retailers demand.

I'd almost be tempted to ask this customer if they would be willing to retail your product in California.:cool:

[shadojake]

Hey, she did say I ought to be selling them in CA. Sometimes things that seem like a silly idea, really isn't.

[KristineS]

There are a lot of things that could be impacting that store's sales. How is the product displayed? How are they marketing the product? How does it fit in with the rest of the products in the store?

You set the MSRP for your product, and stores can choose whether they want to abide by that MSRP or go for a bigger price. As long as you're selling on your website at MSRP, then I don't see where that impacts this store at all. Don't let them dictate pricing, that's a slippery slope.

The question now is how much the loss of their business would impact your bottom line. If it wouldn't be much or if it could be replaced, I'd just let them move on. If it would make a significant impact, I'd ask them the questions I mentioned above, and see if there are some areas where they could improve what they do and help boost sales.

[shadojake]

There are a lot of things that could be impacting that store's sales. How is the product displayed? How are they marketing the product? How does it fit in with the rest of the products in the store?

You set the MSRP for your product, and stores can choose whether they want to abide by that MSRP or go for a bigger price. As long as you're selling on your website at MSRP, then I don't see where that impacts this store at all. Don't let them dictate pricing, that's a slippery slope.

The question now is how much the loss of their business would impact your bottom line. If it wouldn't be much or if it could be replaced, I'd just let them move on. If it would make a significant impact, I'd ask them the questions I mentioned above, and see if there are some areas where they could improve what they do and help boost sales.

It does make a difference what they sell the items for. The products are on consignment and Vintage Bubbles has received no money as of yet. VB has money invested and the products have been sitting there, a while apparently. The opportunity to sell those particular items during this time frame may have been lost. One really never knows. But each day that one does not sell is a day Vintage Bubbles never gets back to sell it to someone else.

Vintage Bubbles, following up on KristineS, if it has been a while since you have been in the store, I would go just look around and see for myself how the items are displayed. See for yourself if it fits with their other products. That is what I do before I ever introduce myself to the owner/manager/decision maker. I get a feel for the store. For some stores, I have never revealed why I was really there. Others, I have approached them and got one or more of my designs in the store. However, I have never signed a contract. It is all left up to the discretion of either party whether to continue on a day to day basis.

One store carries a line of my monogram coasters. They have reordered on numerous occasions and this is a wholesale arrangement. My point is that once you find a fit, it CAN be successful.

[Dave Landry]

I have to concur with vangogh: see if you could work with them to lower their price, while also lowering what you charge them. Also, look into setting the MSRP for your product. That way, stores can decide whether they want to go along with that MSRP, or go for a bigger price.

[Damon the Marketer]

Price should never be an issue. If it is, you've got marketing problems.

I've worked with a guy selling cardboard boxes for God's sake. Price is never something worth your brainpower.

[KristineS]

It does make a difference what they sell the items for. The products are on consignment and Vintage Bubbles has received no money as of yet. VB has money invested and the products have been sitting there, a while apparently. The opportunity to sell those particular items during this time frame may have been lost. One really never knows. But each day that one does not sell is a day Vintage Bubbles never gets back to sell it to someone else.



You're right, I did miss the bit about consignment. I was looking at it more from the standpoint of making sure you were selling at the same base price as any stores retailing your product, if you were to sell online. The consignment thing does make it a bit of a different animal. Very good point.